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The US healthcare payers’ arena has been witnessing a lot of private health insurance exchange (private exchange technology New York) related activities over the past year. Last year in August, Walgreens, US largest drugstore chain, declared its plans to set up private health insurance exchange. In September 2011, Wellpoint, in partnership with BCBS Michigan and Health Care Service Corporation, bought controlling stakes in Michigan based Bloomhealth to run its private insurance exchange. In continuance with the growing private health insurance exchange trend, in May this year, TowersWatson a NY-based professional services company, signed a deal with Extend Health to take over its largest private Medicare exchange operations.

Payers, competing in private exchange marketplace, may feel the coercive demand and supply forces that are driving the establishment of numerous private exchanges. Unbridled increase in healthcare costs, threat of public exchanges usurping the individual and group markets and growing demands among the consumers for wider health choices etc. has stimulated many payers to leap onto the private insurance exchange bandwagon.

Two types of private health exchange models have gained traction in the current US markets – single-carrier exchanges and multi-carrier exchanges. While single-carrier exchanges are platforms set up by single payers, multi-carrier exchanges on the other hand, feature wide range of health products from various participating insurers. Bswift, a Chicago based firm, released a white paper that uses analogies of a “farmer’s market” and “roadside stand” to draw an insightful comparison between the different emerging insurance exchanges models.

The growth and success of these exchanges hinges on payers ability to design a holistic and well-researched private exchange strategy, after carefully analyzing and assessing the current and upcoming market trends. For instance, the healthcare market is noticing a growing popularity of defined contribution plans in place of traditionally offered defined-benefits plan among businesses. The defined-benefits model is gradually disappearing from the US healthcare spectrum with only 13 of Fortune 100 companies offering traditional defined-benefit plans to new employees in 2011. Healthcare experts too are projecting a future paradigm market shift to defined contribution models that allow insurers to cap their total annual health coverage contributions and liabilities by transferring high healthcare cost risks from employers to employees.

Private health exchanges can act as distribution channels that can facilitate employers in seamlessly shifting to defined contribution models. Through private exchanges, employers can ensure access to wide range of cost-effective health product choices to their employees.

Understandably, the interest and curiosity for private exchanges is growing among employers. Aon Hewitt, a human resource consulting and outsourcing firm conducted a Corporate Health Exchange Survey earlier this year that identified 44% of the 562 surveyed organizations that believe private health insurance exchange models would be the most preferred channel for extending coverage to employees in the upcoming 3-5 years.

Private exchanges’ future growth and success can be attributed to their service offering that liberates employers from the complex task of designing and managing health care benefit plans. Private exchanges, whether as a single-carrier exchange or multiple-carrier exchange, would provide employees access to wide range of health products and services that can be further tailored to suit employers preferences.

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